This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

6 Bank Stock Picks for Earnings Season From FBR

NEW YORK ( TheStreet) -- FBR analyst Paul Miller said Monday that "mortgage banking will continue to be a dominant earnings driver through the end of 2012," and that the banking industry's first-quarter results "support the rally" in stock prices.

With "roughly 75% of the banking industry by assets having reported 1Q results," Miller expects the bank stock rally to continue, "as this quarter's solid earnings results, with the expectation of more to come, justify current valuations."

President Obama's expansion of the Home Affordable Refinance Program, or HARP 2, which allows borrowers with mortgage loans held by Fannie Mae (FNMA) or Freddie Mac (FMCC) to refinance their entire loan balances at today's low rates, no matter how much the value of the underlying home has dropped, has "yet to make a significant impact on the system," according to Miller.

Underlining the potential for growing mortgage originations to boost earnings this year, Miller said that "this quarter, mortgage banks reported some of the highest gain-on-sale margins we have seen in years," as the lenders quickly sell newly originated loans to the government-sponsored mortgage enterprises. Regional lenders are not only benefiting from HARP 2, they are absorbing business given up by Bank of America (BAC) and Ally Financial, which have been "significantly pulling back on correspondent lending, which decreased origination capacity."

Miller said that loan growth has been generally weak, with total loan balances growing "only 0.5% (sequentially) on average, aided by continued expansion in [commercial and industrial] and residential mortgage portfolios," with regional banks having the best growth prospects.

With the largest banks continuing "to trade at a discount to small- and mid-cap peers, even after having cut the valuation gap in half (on a [tangible book value] basis) since the beginning of the year," FBR said, "there is more room to run for the larger banks, as investors further appreciate a strengthening economy, potential regulatory reform, and the large caps' diversified revenue streams."

FBR "continues to encourage investors to put money into" the following three large banks and also notes "company-specific opportunities" for three regional banks, also listed below:
1 of 7

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
FITB $19.97 0.00%
JPM $64.13 0.00%
PNC $91.23 0.00%
WBS $35.34 0.00%
WFC $53.54 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs